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Is Mylan Cheap Yet?

At the
Mylan(MYL - Get Report) annual meeting in late July, Chairman Milan Puskar had a simple message for shareholders: "Keep the faith."

In the two months before the meeting and in the four months following it, shareholders of the generic drugmaker have had their own message: "Sell the stock."

Recently, Mylan's shares have dropped to levels not seen in more than five years on a split-adjusted basis, hitting an intraday low of $12.93 on Nov. 21. It closed at $13.61 on Nov. 23, and is down 39% since early May. Earlier this month, major bond-rating firms cut their credit ratings, pushing Mylan deeper into junk-bond territory.

Mylan makes the bond guys nervous and the equity guys jittery over its $6.8 billion purchase in October of the generic-drug division of
Merck KGaA, the German drug and chemical conglomerate.

Analysts like the fact that Mylan is now the world's third-largest generic-drugmaker by sales, significantly expanding its size and geographic scope to compete with industry leaders
Teva Pharmaceutical Industries(TEVA - Get Report) and the Sandoz division of
Novartis(NVS - Get Report).

But many also believe Mylan paid too much and assumed too much debt. They worry that Mylan lacks managerial experience for dealing with a sprawling enterprise spread over several continents.

"We see Mylan management as the key source of risk for investors," says Aaron Gal, of Sanford C. Bernstein & Co., in a recent report. "We are concerned both about the company's lack of experience in global operations and its spotty track record in driving investor returns."

Mylan has begun hiring top managers from companies with heavy international exposure, such as
Pfizer(PFE - Get Report) and
Sanofi-Aventis(SNY - Get Report).